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Pre-Approved Retirement Plans Adoption Deadline Approaches

For employers who provide 401(k), profit sharing or other defined contribution retirement benefits using a pre-approved plan document, such as a prototype or volume submitter plan, the deadline to adopt the required amendments under the Pension Protection Act of 2006 is April 30, 2016.

Regulations require that prototype and volume submitter plan documents be rewritten, reviewed and approved by the IRS once every six years to conform to changes in the law. Prior to the end of that six year cycle, each participating employer must adopt the amended IRS-approved document. Failure to adopt the amendments in a timely manner could jeopardize the tax-qualified status of the employer’s plan.

It is the responsibility of your prototype plan sponsor or volume submitter provider to ensure that the plan document was updated and submitted to the IRS in a timely manner. As the employer, it is your responsibility to ensure that you have executed the required amended and restated document (which often takes the form of a new adoption agreement and an underlying basic plan document).

Although the prototype plan sponsor or volume submitter provider is likely to assist you by transferring your old plan provisions to the new document, it is your responsibility to ensure that any changes to your plan are intended.

Please note that if a pre-approved defined contribution plan was adopted for the very first time after January 1, 2016, the deadline to adopt the amendments identified in the Pension Protection Act of 2006 is extended to April 30, 2017. This generally applies to employers who are using their own plan documents (often referred to as “individually designed” plan documents).

It can sometimes be difficult to navigate these rules, especially where an employer modifies a pre-approved plan document in any significant way. Generally, employers do not file for a determination letter if the employer is using a pre-approved plan. However, employers who modify their volume submitter plans may apply for a determination letter under a streamlined determination letter program, if filed by April 30, 2016.

Plans eligible for the April 30, 2017 extension (described above) have until that date to file under the same streamlined program. The streamlined program allows the employer to be certain that their modifications to a volume submitter plan are not too extensive to rely upon the IRS’s approval of the sponsor’s volume submitter document. If an employer uses the streamlined program and the IRS determines that the changes are not compatible with the volume submitter plan, the IRS will require the employer to pay a higher fee and submit the more extensive determination letter application applicable to individually designed plans.

Unfortunately, the IRS has not been clear about the types of changes that would necessitate a streamlined determination letter filing or disqualify an employer plan from relying upon the IRS’s approval of the volume submitter sponsor’s document, other than to refer to the latter as “extensive” modifications to the volume submitter document.

Prototype plans may not file under the streamlined determination letter program (as a result, most employers do not modify prototype plan documents for fear of losing reliance on the IRS’s opinion letter approving the sponsor’s prototype plan document).

©2022 MICHAEL BEST & FRIEDRICH LLPNational Law Review, Volume VI, Number 56

About this Author

Martin Tierney, Michael Best Law Firm, Employee Benefits Attorney

Clients turn to Martin for his tenacious problem-solving approach to all areas of employee benefits law. He is particularly valued for his track record of untangling and simplifying complex executive compensation matters. Clients seek his counsel with respect to retirement and executive compensation plan design, ongoing compliance with tax and regulatory requirements, and benefits issues in mergers and acquisitions.

Martin has spoken frequently on employee and retirement benefits topics. He has written more than a dozen articles for the...

Kirk Pelikan, Michael Best Law Firm, Labor and Employment Attorney

Kirk’s practice focuses on legal issues related to all aspects of the employment cycle, from hiring through termination and severance. Substantially experienced in both benefits and employment law, Kirk is well positioned to help clients respond to the opportunities, vulnerabilities and benefit ramifications of particular employment decisions.

Kirk’s focus includes:

  • Developing and maintaining effective compliance strategies related to defined benefit plans, defined contribution plans, executive...

Jorge Leon, Michael Best Law Firm, Labor and Employee Benefits Attorney
Partner, Diversity and Inclusion Committee Chair

Plan sponsors, administrators, fiduciaries, and third-party recordkeepers turn to Jorge for strategic counsel on designing, establishing, and maintaining retirement plans. Clients laud his responsiveness and meticulous approach to matters ranging from plan establishment and design to government investigations and inquiries, ongoing compliance and qualification, ERISA litigation, and mergers and acquisitions.

Before joining Michael Best, Jorge practiced for 15 years at a premiere Chicago-based AmLaw 100 firm, where he was the lead partner...

Mark Lotito, Michael Best Law Firm, Labor and Employment Attorney

Mark assists clients in a range of employee benefits matters, including legal compliance, transaction due diligence, and litigation. He brings a multifaceted, big picture outlook to helping clients unravel the challenges of complex benefits-related problems.

He has established a strong track record in achieving successful outcomes for clients confronted by employee benefits litigation and arbitration claims. Mark has also successfully litigated patent and trade secret litigation claims, as well as employment non-compete claims.

Charles Stevens, Michael Best Law Firm, Labor and Employment Attorney

A persuasive advocate, Charlie vigorously defends employers and benefit plans in courts and other forums. He excels at assessing and fixing problems that arise with employee benefit programs and providing a strategically driven approach to benefits compliance and risk management planning.

As exclusive employee benefits counsel to many nationwide employers, Charlie’s practice focus extends to:

  • Counseling on Affordable Care Act (ACA) compliance and strategic planning, particularly with respect to contingent...